Five Years On, Keystone Backer Marks an Unhappy Anniversary

The Keystone Oil Pipeline is pictured under construction in North Dakota.

Five years ago this week the global financial crisis was triggered by the collapse of Lehman Brothers Holdings Inc. But this week also marks the five-year anniversary of another, initially quieter, event: the application for approval of the Keystone XL pipeline to carry Canadian crude directly to the U.S. Gulf coast.

On Sept. 19, 2008, TransCanada Corp. filed with the U.S. State Department to ship an additional 500,000 barrels of oil a day through an expanded, then-unnamed pipe in its existing Keystone system linking Canada and the U.S. The company had formally announced its plans to file two months earlier.

What the Calgary-based operator expected to be an 18-to-24 month waiting period has now dragged on for five years, with no firm deadline in sight.

KXL, as the expansion project is now known, has become mired in controversy as the White House has delayed making a final decision on the hotly contested proposal.

Supporters in the U.S. say the pipeline will bring construction jobs and needed heavy crude from Canada to offset declining imports from Mexico and Venezuela. But critics say approving KXL would accelerate the development of Alberta’s oil sands and exacerbate greenhouse gas emissions.

TransCanada says it’s not prepared to wait out the Obama administration. “I don’t think we’d wait another three years,” said Alex Pourbaix, TransCanada’s president of energy and oil pipelines. “If the project were to be delayed that long, I’d likely see a scenario where we’d utilize all that equipment on other projects. Obviously, we don’t see it coming to that. ”

The company says has spent about $2 billion so far on KXL, mostly for segments of pipe and pumps, but also for rights-of-way and permitting.

Most Canadian government and industry officials strongly back the pipeline, which Prime Minister Stephen Harper once called a “no brainer.”

But not all voices in the oil patch believe the project’s delay has been a setback. The CEO of Alberta natural gas and light oil producer Birchcliff Energy Ltd., Jeff Tonken, says the White House’s slow-go approach has forced Canada to look hard at other markets outside the U.S. to export its surplus energy.

“The best thing that has happened to LNG is Obama’s lack of approval for Keystone,” Mr. Tonken told surprised attendees at a liquefied natural gas export conference in Calgary on Wednesday. “I thank him for not making that (decision).”

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